Like most skills in life, the younger you acquire them the more confident and independent you will be. This is also true when it comes to learning about money. If you teach your children how to be responsible with their finances when they are young they are more likely to make smart money choices throughout their lives. Most children have formed habits around money by the age of 7.
If you are not sure where to start, here are a few ways you can help:
Needs vs. Wants: Your child needs to recognize the difference between a need and want. Explain that needs include housing, food, water etc. These costs need to be covered first. Once our needs are met, money can be used towards our wants (vacations, restaurants etc). Recognizing the difference will help your child learn to live within their means and the importance of saving towards “wants”.
Everyday spending: Involve your children in every day financial choices so they become familiar with different vocabulary. Explain why you buy specific items over others (sales, coupons etc). Part of them learning financial vocabulary includes the difference of paying with cash, debit or credit. Involve your children in looking at flyers for items the family needs.
Teach them how much things cost: As children get a little older you can start to show them how much various items cost. They may be shocked to realize how much groceries, hydro, gas etc. costs. This will help them appreciate money and how it should not be spent on unnecessary items.
For younger children: Most children have Piggy Banks which is good way to save, but using a clear jar/jug or such where they can actually see their money growing is even better. Also have a cash register in their play area and play “Let’s go Shopping” have supermarket items labelled with prices and have them practice counting out the pretend coins and bills.
Monkey see, Monkey do: Like most things, children will copy characteristics they see in their parents and people they look up too. If you manage and spend your money responsibly there’s a much higher chance your children will follow. Here are a few tips to remember for yourself:
- Make a list and stick to it when shopping
- Pay bills on time
- Follow a household budget
- Only buying things you can afford
- Save for big purchases
Discuss where money comes from: It sounds like a very basic concept but the idea that you need to work hard for every dollar is something that might not be obvious to a child. This leads into giving your child a commission for doing household chores. They will eventually understand how much work they need to do to save for something, they will learn to think twice if that new video game is worth it! It is much easier to spend mom and dad’s money than their hard earned money!
Open a bank account for your child: If you haven’t already, set up a bank account for your child. This is a great step for their financial future. They can contribute money to their savings on a regular basis and use their debit card to pay for purchases. Not to mention them having their own account with their own name on it will make them feel grown up and independent. Many financial institutions offer accounts for children and youth with no fee. The Government of Canada offers a great online comparison tool to find the perfect account for you and your family. Click here to check it out.
Giving to others: Once your child starts to earn money, they can choose an organization that they are passionate about to give back. They will soon learn that giving makes them feel amazing as well as the recipient.
It’s a new year, the perfect time to start off on the right foot with you and your child’s finances!